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Update Regarding DOJ’s FCPA Priorities

Keeping abreast of developments in the Foreign Corrupt Practices Act (“FCPA”) arena, Smith Pachter McWhorter PLC attorneys have been presenting at and attending ACI’s International Conference on the FCPA, which is took place this week near Washington, D.C.  Notably, one of the keynote speakers was Assistant Attorney General Brian Benczkowski, who leads the Department of Justice’s Criminal Division.  Benczkowski spoke and then responded to a question-and-answer session.  The substance of Benczkowski’s remarks are published on DOJ’s website (link here). Several comments are notable for our clients and potential clients.

Benczkowski noted that 2019 has been a banner year for DOJ prosecutions of individuals under the FCPA.  This year, DOJ has charged 34 individuals with FCPA offenses and has announced 30 FCPA guilty pleas from individuals.  Benczkowski also expects DOJ to complete seven criminal resolutions involving corporate defendants by the end of this week. 

The high-water mark for individual prosecutions, Benczkowski said, is the result of DOJ’s focus on individual accountability.  More broadly, because more cases are not proceeding to trial, there should be a growth in the number of judicial opinions applying and interpreting FCPA standards.  DOJ also has been publicizing its declination decisions.  Together, the rationales set forth in declination decisions and evolving court precedent should be instructive to both prosecutors and defense counsel, as parties will have more guidance on the boundaries of FCPA enforcement.

Benczkowski also discussed DOJ prosecution theories related to the recent conviction of Lawrence Hoskins, a senior executive at French power and transportation company, Alstom S.A.  The case was notable for several reasons, including that Hoskins is a British national and none of the alleged misconduct occurred in the United States, but that the misconduct did purportedly benefit Alstom’s U.S. subsidiary.  Benczkowski focused on the DOJ’s use of an agency theory to secure the conviction in that case but explained that the conviction did not mean that DOJ saw itself as now having a “blank check” to prosecute corporate principals based solely on the actions of their subsidiaries, joint ventures or other agents.  Rather, Benczkowski noted that the agency theory has a long legal history (as noted by courts reviewing the Hoskins case) and that DOJ would bring prosecutions where it found compelling evidence that an agent had acted for the benefit of a principal or where an organization’s corporate structure was being used or structured in an effort to improperly shield principals or senior executives from agents’ misconduct that, in fact, benefits the principals or where the agents were actually acting on behalf of the principals.

Reiterating prior DOJ policies, Benczkowski described DOJ’s recent efforts to improve its ability to evaluate corporate compliance programs.  Benczkowski noted that DOJ has developed training for prosecutors that is designed to help them better assess the quality and effectiveness of compliance programs.  Also, where corporate defendants have admitted to wrongdoing, if that same corporate defendant has invested heavily in improving its compliance programs, DOJ will factor that investment in its decisions as to whether a monitorship should be imposed.

In what was perhaps the most talked-about portion of his speech, Benczkowski also discussed DOJ’s efforts to streamline and standardize settlement negotiations.  Under these efforts, when settlement discussions begin, prosecutors are being asked to evaluate U.S. Sentencing Guidelines, prior resolutions and penalties related to similar misconduct so that opening settlement offers are not arbitrarily high.  The stated goals are to shrink the range of settlement amounts that are under review and to give the parties objective bases that relate to DOJ’s offers, even opening offers, and to try to reduce the amount of time and resources consumed during settlement discussions.

Our clients and potential clients should note DOJ’s emphasis on robust compliance programs as being highly important to DOJ’s evaluation of misconduct and whether any misconduct will be attributed or imputed to the larger organization or limited to individual wrongdoers.  Coupled with enforcement priorities and prosecution theories that seek to prosecute individuals for their own misconduct and for misconduct that is done on behalf of principals, a strong compliance program will help organizations from being blamed for the misconduct of individual employees.  We also note DOJ’s stated goal of providing objective criteria for settlement discussions and how that comes to pass in actual negotiations going forward.

As always, we will continue to monitor legal developments in the government investigations space so that we can provide proactive and comprehensive guidance to our clients. For more information, contact:

Iris Bennet
ibennet@smithpachter.com

Cormac Connor
cconnor@smithpachter.com

Vincent Li
vli@smithpachter.com 

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